China’s financial relationship with Africa has undergone a dramatic reversal over the past decade, transforming the country from a major lender into a net recipient of funds from the continent, according to a report by ONE Data for the Development Finance Observatory published on Tuesday.
According to the report, new data show that China has shifted from being a net provider of finance to low and lower middle-income countries, with net outflows of $48 bn a decade ago, to now being a net extractor of $24 bn.
According to the report, “over the last decade, China shifted from a net provider of finance for low- and middle-income countries (transferring $48 billion) to a net extractor (pulling $24 billion out). Meanwhile, multilateral lenders stepped up, boosting net financing by 124 per cent and now providing 56 per cent of net flows, or $378.7 billion between 2020-2024.”
China’s role as a major financier for Africa has been central to the continent’s infrastructure growth over the last two decades. Its loans funded large-scale projects including roads, railways, ports, power plants, and telecom networks on the continent.
However, the financing landscape has changed significantly in recent years. China has tightened its overseas lending due to rising debt risks, slowing domestic growth, and a more cautious approach to foreign exposure.
The data suggests that while Chinese financing has declined sharply, debt servicing obligations have continued to rise, placing additional strain on public finances in several African countries.
The report also added that public and publicly guaranteed long-term external debt from private sources declined from 19 per cent of net flows to 1 per cent, maintaining that this type of debt collapsed from $115 billion in net new resources over the 2010-2014 period to $7.3 billion in the last five years.
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